TIP OF THE WEEK: The Funding Year (FY) 2015 application filing window has been extended for THREE additional weeks. The application filing window will now close on April 16, 2015. Please do not use the extension of the FCC Form 471 application filing window to delay submission of your application. We are already starting the review of FY2015 applications, and those applications that have been submitted, certified and meet program requirements will likely get a decision first.

Commitments for Funding Year 2014

Funding Year 2014. USAC will release FY2014 Wave 45 Funding Commitment Decision Letters (FCDLs) on March 18. This wave includes commitments for approved Priority 1 (Telecommunications Services and Internet Access) requests at all discount levels. As of March 13, FY2014 commitments total over $2.17 billion.

In this issue, we are providing general guidance on Category Two budgets in a question-and-answer format. In the near future we will provide more detailed guidance for schools and for libraries.

Q1. How do the budgets for category two services work?

A1. Starting in FY2015, requests for category two funding – that is, internal connections (IC), managed internal broadband services (MIBS), and basic maintenance of internal connections (BMIC) – are limited to a budget based on the number of students in a school or the number of square feet of a library outlet. A schools or library can decide if it wants to spend all of its budget in one year or if it wants to spread it out over any of the five years. Additionally, the school or library can decide if it wants to use all of its category two funding on one of the three service types, or for a combination of all three. For example, you could request all of your category two five-year budget in FY2015 for just internal connections products, or you could divide up your request over multiple years and request support for IC, MIBS, and BMIC products and services.

Q2. What are the category two budgets for schools?

A2. Individual schools are eligible for E-rate discounts on pre-discount purchases of up to $150 per student over a five-year budget. To ensure that all schools receive sufficient support, there is a pre-discount funding floor of up to $9,200 over five years for each school.

Q3. What are the category two budgets for libraries?

A3. Depending on their IMLS locale codes, libraries qualify for one of two different budget rates. Libraries that are located in the IMLS locale code of 11 - City, Large, 12 – City, Midsize, or 21 – Suburb, Large (click here to download the relevant files) are eligible for a pre-discount budget of up to $5.00 per square foot over five years. All other libraries are eligible for a pre-discount budget of up to $2.30 per square foot over five years. To ensure that all libraries receive sufficient support, there is a pre-discount funding floor of up to $9,200 over five years for each library outlet.

Q4. Is the budget pre-discount or post-discount?

A4. The category two budget is pre-discount. Note that, even though all schools are eligible for $150 per student, a school with an 80 percent discount rate will be eligible for $120 in E-rate support per student, while a school with a 40 percent discount will be eligible for $60 in E-rate support per student.

Similarly, a library eligible for $5 per square foot with an 80 percent discount rate will be eligible for $4 in E-rate support per square foot, while a library eligible for $5 per square foot with a 40 percent discount rate will be eligible for $2 in E-rate support per square foot.

Q5. Does E-rate funding received prior to FY2015 count against the five-year budget for category two purchases?

A5. No. FY2015 is a clean slate. In FY2015, all schools and libraries will be eligible for the full amount of their five-year budgets.

Q6. How long will the category two budgets be in effect?

A6. The category two budgets are in effect for schools and libraries that receive category two funding for one or more funding years between FY2015-19. The first year that an eligible school or library receives E-rate support will be the first year of its five-year funding cycle.

Q7. The cost to update the network and maintain the eligible equipment exceeds my budget. If I spend more than my budget will that affect my E-rate request?

A7. No. Although the category two request limits what E-rate will pay for, you can spend more than your category two budget as long as you pay for those additional products and services out of your own pocket.

Q8. Are contracts for managed internal broadband services limited to $30 per student (or a fifth of the per square foot library budget) each year?

A8. No. You decide how to spend your category two budget. You can for example, choose to spread your budget evenly over five years, or you can spend your entire budget in the first year, regardless of the category two service type. Remember that if you have a multiyear contract, you can only receive reimbursements for the portion of the contract that is delivered during the funding year. You will have to request E-rate funding for those services annually.

Q9. What happens if my plans change and I can't use all of the category two funding committed in a year? Can I reduce or cancel funding that USAC has already approved for the current funding year to "free up" money in its budget for the next funding year's requests?

A9. Yes. If you find that you will not spend the entire amount of category two funding that USAC has committed in a particular funding year, you can file an FCC Form 500 to return unused funds. School districts and library systems may need to provide additional information so that you and USAC are in agreement about the impact on a particular school or library outlet's five year budget.

Q10. How do I indicate which products or services should be counted against which budgets?

A10. In the new online FCC Form 471, you will indicate which school or library is getting the products and services in an FRN. For category two FRNs, you will have to indicate how much of the FRN line item costs should be allocated to each school or library. A single FRN line item for the same product or service can include multiple schools or libraries, each with their own cost allocation.

Q11. Can school districts or library systems shift funds or average costs between their schools and libraries?

A11. No, category two funding must be spent for the specific school or library for which they are allotted. These funds cannot be shifted or averaged across your school district or library system.

A12. Transferring equipment is prohibited unless (1) three years have passed since the services were purchased or (2) the equipment is being transferred from a school or library that closed. Applicants transferring equipment from a school or library that closed to another eligible school or library must notify USAC of the transfer.

Q13. If a school or library receives category two items that were purchased with E-rate support from another school or library that is closing, would that have any effect on the school’s five-year category two budget?

A13. No.

Q14. Are the service substitution requirements – which permit applicants to replace an approved purchase with a similar purchase, under limited conditions – still in effect?

A14. Yes. If you need to request a service substitution, remember to follow the guidance on USAC's website to request approval for such substitution requests.

As mentioned above, we will provide more detailed guidance for schools and for libraries on Category Two budgets in an upcoming SL News Brief.